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The Expert View: Weir, Dunelm and Virgin Media
by Harry Brooks on Feb 13, 2013 at 05:01
A roundup of some of the best analyst commentary on shares, including Reckitt Benckiser and Capita.
Our daily round-up of analyst recommendations and commentary, featuring Weir, Dunelm, Virgin Media, Reckitt Benckiser and Capita.
Deutsche Bank sees better sales for Weir
Signs that the market for gas fracking pumps is picking up is good news for Weir (WEIR.L), according to Deutsche Bank analyst Peter Reilly, who has increased his target price for the oil industry specialist.
'Our thesis on Weir has been that the market for gas fracking pumps would start to recover sometime in 2013, but the timing was uncertain,' the analyst said.
'Recent newsflow has been mixed, but none of the peers is getting gloomier and some are getting more optimistic. We are raising our target price due to rolling forward the valuation to 2014E.'
Reilly's target price rises to £24 from £21, and he reiterated his 'buy' recommendation.
Shares in the group closed at £21.02 on Tuesday, up 10p or 0.5%.
Seymour Pierce ups target price for Dunelm
Seymour Pierce analyst Freddie George has upgraded his target price for homewares retailer Dunelm (DNLM.L) following a strong trading update.
The interim results showed pre-tax profits up 14.6% to £59.8 million, marginally beating George's forecast of £59 million, on sales up by 13.4%, including like-for-like growth of 2.2%, to £340.1 million. Gross margins were reported to be up by 30 basis points.
'There is likely to be some profit taking in the stock this morning after the company’s comment on the outlook and following the stock’s strong performance (+17%) in the last quarter. For the time being, we are maintain and reiterate our HOLD recommendation but raise our TP to 740p (from 640p),' the analyst said.
'The company has a clear niche in a category, where competition is fragmented and has, we believe, also a great opportunity to improve gross margins (currently around 50%) by growing own label, direct sourcing and developing a multi-channel platform.'
Shares in the group closed at 788p on Tuesday, down 3.5p or 0.4%.
Liberty bell tolls for Virgin Media
Berenberg Bank analyst Stuart Gordon has downgraded Virgin Media (VMED.L) from 'buy' to 'hold' on news that US group Liberty Global is to buy the business.
Liberty Global's bid values Virgin Media at $47 per share, a 38% premium to Gordon's previous price target. The analyst expects the bid to be successful, and he doesn't think a rival bid is likely.
'Vodafone acquired Cable & Wireless Worldwide and we suspect that it will pursue its UK strategy via this asset. The other mobile operators are unlikely bidders; O2 lacks the financial firepower just now, while with Everything Everywhere’s partners looking at potential exits, we doubt it will bid,' he said.
Shares in the group closed at £29.59 on Tuesday, up 53p or 1.8%.
Don't overestimate Reckitt Benckiser's flu-season fillip, SocGen warns
The sniffs and snivels resulting from the flu season in the US won't be enough to propel household products maker Reckitt Benckiser (RB.L) in the year ahead, according to Societe General analyst Chas Manso, who has reiterated his 'sell' recommendation.
Consensus estimates ahead of today's full-year results have pencilled in weaker fourth-quarter growth than the 2% bump in Q3, despite the well documented cold/flu snap in the US.
'The cold/flu issue is a low price-to-earnings metric,' Manso said. 'It is prudent to assume the season normalizes next year, and we note Perrigo announced the much delayed generic Mucinex 600mg launch will be in March 2013 and J&J is rebuilding its cold/flu business – so trading conditions could be much less favourable next season.'
Manso reiterated his target price of £35.
Shares in the group closed at £42.62 on Tuesday, up 27p or 0.6%.
Shore Capital reiterates 'hold' on Capita
Shore Capital analyst Robin Speakman has reiterated his 'hold' recommendation on outsourcing giant Capita (CPI.L) ahead of preliminary results due at the end of the month.
'We moved Capita off the SELL list on 27th November at 730p, suspecting that news flow was set to be more positive in respect of contract announcements through to the results date and beyond – at least until we expect the public sector market to tighten again in 2014 as the UK election cycle looms,' Speakman said. 'The stock has clearly performed more strongly since November, with the market.
'On a cash flow basis, the valuation looks full to us at over 800p, we have full valuation at c845p, a 10% discount suggests fair value to us of about 760p. Still, we expect contract newsflow to remain positive, we thus retain a HOLD for the present awaiting renewed forecast guidance.'
Shares in the group closed at 813p on Tuesday, up 3.5p or 0.4%.